Topic 17 Strategic Leadership

The Nature of Strategic Leadership Strategic leadership is the process of providing the direction and inspiration necessary to create or sustain an organization

Figure 13-1 Components of Strategic Leadership

Guidelines for Formulating Strategy Determine long-term objectives and priorities Assess current strengths and weaknesses Identify core competencies Evaluate the need for a major change in strategy Identify promising strategies Evaluate the likely outcomes of a strategy Involve other executives in selecting a strategy

Systems Thinking The ability to process information and understand its consequences for the organization in its interaction with the environment

Strategic Planning Strategic planning encompasses those activities that lead to the statement of goals and objectives and the choice of strategy Strategic planning often takes the form of a SWOT analysis, a method of considering strengths, weaknesses, opportunities, and threats in a particular situation

SWOT Analysis Represents an effort to examine the interaction between the particular characteristics of an organization or organizational unit and the external environment

Examples of SWOT Elements Strengths: Favorable location, talented workers, state-of-the-art equipment Weaknesses: Unfavorable location, outdated equipment, limited capital Opportunities: Culturally diverse customer base, changes in technology, deregulation Threats: Ecommerce, declining market, new competitors

Business Strategy Levels Corporate-level strategy asks, “What business are we in?” Business-level strategy asks, “How do we compete?” Functional-level strategy asks, “How do we support the business-level strategy?”

Sample Strategies Differentiation Cost leadership Focus High quality Imitation Strategic alliances Growth through acquisition

Sample Strategies (cont’d) High speed and first-mover strategy Product and global diversification Sticking to core competencies Brand leadership Creating demand by solving problems Conducting business on the Internet Peoplepalooza (competitive advantage through hiring talented people)

Differences Between Lower Level and Upper Echelon Leaders Who the leader is Scope of responsibility Focus Effectiveness criteria

Strategic Forces ORGANIZATIONS Strategy Culture Technology Structure Environment Leadership ORGANIZATIONS

Dual Role of Upper Echelon Leaders Moderating Factors Leadership Characteristics Strategy Formulation Implementation Performance

External Moderators of Executive Discretion Environmental uncertainty Type of industry Market growth Legal constraints

Internal Moderators of Executive Discretion Stability Size and structure Organizational culture Stage of organizational growth Presence, power, and makeup of TMT

Themes in Upper Echelon Style Challenge Seeking Risk taking Openness to change Willingness to innovate Future orientation Need for Control Delegation Centralization Uniformity of practices Focus on process

Strategic Leadership Dimensions High challenge- seeking Low challenge- CHALLENGE- SEEKING HIGH-CONTROL INNOVATOR (HCI) Challenge-seeker who maintains tight control over organization PARTICIPATIVE INNOVATOR (PI) Challenge-seeker who delegates control of organization STATUS QUO GUARDIAN (SQG) Challenge-averse who maintains tight control over organization PROCESS MANAGER (PM) Challenge-averse who delegates control of organization NEED FOR CONTROL High control Low control

LEADER Processes Leaders Use to Impact Their Organization Environment Direct decisions Allocation of resources Reward system Selection of other leaders Promotions Role-modeling Strategy Culture LEADER Structure Leadership Technology

Direct Decisions Vision Mission Strategy Structure Organizational culture Selection of other leaders

Allocation of Resources and Reward System Decisions regarding funding and budgets Allocation of resources to support goals Formal rewards such as salary and bonuses Informal rewards such as recognition Promotion of other leaders and managers

Setting the Norms and Role Modeling Setting decision criteria and rules by which others make decisions Active or subtle role modeling of behaviors and styles

Responsibility of Upper Echelon Leaders Organizational performance Accountability to various internal and external constituents Ethical behavior and role-modeling

Factors That Affect Executive Salaries Firm size Industry competition CEO power and discretion Internationalization High stress and instability

Constraints on Leaders Internal Constraints Coalitions in the organization Strong organizational culture External Constraints Organizations primary products and services Powerful external stakeholders Perception of the organization’s performance Constraints and Leader Traits as Joint Determinants

Strategic Leadership Political Power and Strategic Leadership Executive Tenure and Strategic Leadership Executive Teams Potential advantages of strategic teams Executive teams and organizational effectiveness

How Leaders Influence Organizational Performance Efficiency and Process Reliability Innovation and Adaptation Human Resources and Relations Leader Influence on Performance Determinants

Efficiency and Process Reliability Performance management and goal setting programs (e.g.,MBO, zero defects) Process and quality improvement programs (quality circles,TQM, Six Sigma) Cost reduction programs (downsizing, outsourcing, just-in-time inventory) Structural forms (functional specialization, formalization, standardization) Appraisal, recognition, and reward systems focused on efficiency and process reliability

Human Resources and Relations Quality of worklife programs (flextime, job sharing, child care, fitness center) Employee benefit programs (health care, vacations, retirement, sabbaticals) Socialization and team building (orientation programs, ceremonies and rituals, social events and celebrations) Employee development programs (training, mentoring, 360 feedback, education subsidies)

Human Resources and Relations Human resource planning (succession planning, assessment centers, recruiting programs) Empowerment programs (self-managed teams, employee ownership, industrial democracy) Recognition and reward programs focused on loyalty, service, or skill acquisition

Innovation and Adaptation Competitor and market analysis programs (market surveys, focus groups, consumer panels, comparative product testing, benchmarking competitor products and processes) Innovation programs (intrapreneurship, quality circles, innovation goals) Knowledge acquisition (consultants, joint ventures, import best practices from outside) Organizational learning (knowledge management systems, postmortums, joint ventures)

Innovation and Adaptation Temporary structural forms for implementing change (steering committee, task forces) Growth and diversification programs (mergers and acquisitions, franchises, joint ventures) Structural forms (research departments, small product divisions, product managers crossfunctional product development teams, facilities designed to encourage innovation) Appraisal, recognition, and reward systems focused on innovation and customer satisfaction

Questions for External Monitoring What do clients and customers need and want? What is the reaction of clients and customers to the organization’s current products and services? Who are the primary competitors? What strategies are they pursuing (e.g., pricing, advertising and promotions, new products, customer service, etc.)? How do competitors’ products and services compare to those of the manager’s organization? What events affect the acquisition of materials, energy, information, and other inputs used by the organization to conduct its operations?

Questions for External Monitoring How will the organization be affected by new legislation and by government agencies that regulate its activities (e.g., labor laws, environmental regulations, safety standards, tax policies, etc.)? How will new technologies affect the organization’s products, services, and operations? How will the organization be affected by changes in the economy (employment level, interest rates, growth rates)? How will the organization be affected by changing population demographics (e.g., aging, diversity)? How will the organization be affected by international events (e.g., trade agreements, import restrictions, currency changes, wars and revolutions)?

Guidelines for External Monitoring Identify relevant information to gather Use multiple sources of relevant information Learn what clients and customers need and want Learn about the products and activities of competitors Relate environmental information to strategic plans

Knowledge Management and the Learning Organization Knowledge management is the systematic sharing of information to achieve such goals as innovation, nonduplication of effort, and competitive advantage A learning organization is one that is skilled at creating, acquiring, and transferring knowledge, and at modifying behavior to reflect new knowledge and insights

Where Corporate Knowledge Lives

Initiatives to Enhance Organizational Learning Create a strategic intent to learn Create a shared vision Empower employees to make decisions and seek continuous improvement Develop systems thinking Encourage personal mastery of the job

Initiatives to Enhance Organizational Learning (cont’d) Encourage team learning Encourage action learning Learn from failure Encourage continuous experimentation Develop political skills to make connections with and influence others Encourage creative thinking

Summary Strategic leadership deals with the major purposes of an organization or organizational unit Five important components of strategic leadership include high-level cognitive ability, multiple inputs to strategy formulation, anticipating and creating a future, revolutionary thinking, and creation of a vision

Summary (cont’d) Strategic planning often takes the form of a SWOT analysis Strategic leaders use many different types of business strategies Leaders must help their organizations adapt to the environment by taking initiatives to create a learning organization

Leading Change: Anne Mulcahy In charge of turning Xerox around Focus on giving stakeholders hope and confidence Role model desired behaviors Leading by example

Leadership In Action: A.G. Lafley Soft-spoken and understated Careful listener Focus on customer Repeat simple messages Change culture through communication and symbols Openness and focus on people

The Leadership Challenge CEO involvement in nomination of board members helps assure that members with the right skills and expertise are selected Those nominated by CEO may have a conflict of interest and a positive bias towards the CEO Creation of a balance of members nominated by different stakeholders is essential